and Market Demographics CHINA RETAIL MARKET: CONSUMERS TODAY AND - - PowerPoint PPT Presentation

ANALYSIS: Pecan Nut Export to China and Market Demographics

INSHELL PECAN EXPORTED TO CHINA

CHINA RETAIL MARKET: CONSUMERS TODAY AND THE FUTURE INSHELL PECAN IMPORTED BY CHINA HOW TO KEEP EXPORT AND PRICES STRONG

CHINA RETAIL MARKETS

CONSUMERS OF TODAY …AND TOMORROW

… the number keeps rising in China

China is the largest international market for Tree Nuts outside the U.S.

China Market Demographics

 1.4 Billion people in China  China will gain 182 Million consumers in the next 10 years  China’s middle class is now the size of the entire U.S. popu  By 2020, 81% growth in consumption is projected  From “CHASING WEALTH” to “CHASING HEALTH”= EAT RIGHT

Positive Numbers for 2017 China Exports

• Shipments to China accounted for 51% of all US pecan exports

compared to 44% last year. Overall exports to China are up 27%.

• CHINA PECAN IMPORT DUTY REDUCED FROM 10% TO 7% IN

DECEMBER 2017.

**PECAN IMPORT DUTY FROM AUSTRALIA WILL BE 0% IN 2019!

E-Commerce nut purchases are growing rapidly. Traditional retail market is declining .

New trends in nuts for China

• Less flavored
• Minimal processing
• Kernel market is growing very fast

Top 10 snack Brand in 2016 Top 10 E-commerce snack Brand

1 Three Squirrels 三只松鼠松 Three Squirrels 三只松鼠 2 Be & Cheery 百草味 Be & Cheery 百草味 3 Bestore 良品铺子 Bestore 良品铺子 4 QiaQia 恰恰 Tong Nian Ji 童年记 5 HuaWeiHeng 华味亨 Xin Bian Jie 新边界 6 Aming 阿明 Xin Nong Ge 新农哥 7 Lyfen 来伊份 Silly Funny Bear 憨豆熊 8 Kswfood 口水娃 Lao Jie Kou 老街口 9 Tenwow 天喔 Lou Lan Mi Yu 楼兰蜜语 10 HengKang 恒康 Kou Kou Fu 口口福

E-Commerce Penetration Growing Rapidly

E-Commerce Penetration Growing Rapidly

Public data shows that China’s nuts business value is 29 billion in 2017, and will reach 50 billion in 2020. China’s consumption of tree nuts increased 17% from January 2017 to December 2017. However, consumption of Pecans & Macadamias down slightly September through December compared to last year. ( Resources: sycm)

250 1200 3800 5500 9000 9000

2000 4000 6000 8000 10000 12000 2012 2013 2014 2015 2016 2017

Annual Sale of Pecans (NIS)

Annual Revenue Linear (Annual Revenue)

30 326 1100 2600 5500 6500

1000 2000 3000 4000 5000 6000 7000 2012 2013 2014 2015 2016 2017 MILLION

Annual Revenue

Annual Revenue Linear (Annual Revenue)

Nuts Sales Ranking in 2017 (E-Commerce)

Top Ten China Nuts consumption Markets Jan –Dec 2017

• Went from a single retail to the Largest Online Agri-business in 6 years.
• According to the latest sales report, their sales reached 1.03 Billion in 2017.

INSHELL PECAN IMPORTED BY CHINA

U.S. | SOUTH AFRICA | MEXICO

UNDERSTANDING OUR COMPETITORS

• South Africa, Mexico
• Other Tree Nuts

10,000 20,000 30,000 40,000 50,000 US MEXICO SOUTH AFRICA OTHERS (ARGENTINA PERU, AUSTRALIA ) TOTAL 31,305 11,000 6,138 1,500 49,943

2016 WORLD INSHELL PECAN EXPORT TO CHINA (MT)

Inshell Pecan exported to China are mainly from the following areas:

Sonora, Mexico Georgia, USA South Africa

• 10,000

20,000 30,000 40,000 50,000 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 44,522 30,402 38,657 25,404 31,305

U.S. INSHELL PECAN EXPORTS TO CHINA (MT)

• 2,000

4,000 6,000 8,000 2011 2012 2013 2014 2015 2016 3,316 3,141 3,337 4,092 5,579 6,604

MEXICO INSHELL PECAN EXPORTS TO CHINA (MT)

• 5,000

10,000 15,000 2011 2012 2013 2014 2015 2016 2017 (est) 3,415 7,123 8,618 9,288 6,780 6,138 12,500

SOUTH AFRICA INSHELL PECAN EXPORTS TO CHINA (MT)

**The export number does not include the quantity that was shipped through US port.

Source: Agriculture information Service Mexico,SAGARPA COMENUEZ, Productora, SIAP, NPSA, Carter Pecan, South Africa Pecan Processors Association

U.S. INSHELL AND PECAN KERNEL EXPORTS TO CHINA (MT)

• 10,000

20,000 30,000 40,000 50,000 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 44,522 30,402 38,657 25,404 31,305

U.S. INSHELL PECAN EXPORTS TO CHINA (Included: China, Hong Kong, Vietnam)

Source: NPSA

USDA crop year Sep. 1 to August. 30

• 500

1,000 1,500 2,000 2,500 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 352 330 613 874 2,264

PECAN KERNEL EXPORTS TO CHINA (Included: China, Hong Kong, Vietnam)

• 50,000

100,000 150,000 200,000 2012/13 2013/14 2014/15 2015/16 2016/17 166,468 120,805 119,839 115,344 119,159

U.S. PECAN CROP PRODUCTION

• 5,000

10,000 15,000 20,000 25,000 30,000 35,000 2012 2013 2014 2015 2016 2017 30,775 15,729 23,952 16,314 17,915 23,502

U.S. INSHELL PECAN SHIPMENTS TO CHINA SEPTEMBER TO DECEMBER (MT)

SEP OCT NOV DEC

Approximately 26% of the U.S. Pecan production is shipped to China. Approximately 75% of the U.S. Inshell Pecan exported to China is from Georgia.

• 10,000

20,000 30,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) 6,138 12,500 23,036

SOUTH AFRICA INSHELL PECAN EXPORT TO CHINA (MT) South Africa exports 75% of inshell pecan to China

Source: INC, Golden Peanut & Tree Nut, , INC online data, South Africa Pecan Processors Association

29,000

• 10,000

20,000 30,000 40,000 50,000 60,000 70,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est)

SOUTH AFRICA PLANTED HECTARES

10,080 16,500 32,908

• 10,000

20,000 30,000 40,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (est) 2018 (est.) 2019 (est.) 2020 (est.) 2021 (est.)

SOUTH AFRICA PECAN PRODUCTION (MT) 70% of South Africa pecan production is in the Northern Cape Province Approximately 29,000 hectares planted (currently) Approximately 28% hectares are currently in production Approximately 75% of inshell pecan nuts are exported to China. Main Cultivars : Wichita, Choctaw, Western, Pawnee. 36% of the crop is 45-55 nuts per pound and 40% is 55-65 nuts per pound South Africa crop harvest time is favorable for marketing to China

SOUTH AFRICA

50,000 100,000 150,000 200,000 2012 2013 2014 2015 2016 2017 (est.) 2018 (est.) 2019 (est.) 2020 (est.) 2021 (est.) 142,140 161,389

MEXICO PECAN PRODUCTION (MT)

Source: Agriculture information Service Mexico, SAGARPA COMENUEZ, Productora, SIAP

5,000 10,000 15,000 20,000 25,000 2015 2016 2017 (est.) 2018 (est.) 2019 (est.) 2020 (est.) 2021 (est.) 17,500 25,000

SONORA, MEXICO PRODUCTION IN (MT)

• 20,000

40,000 60,000 80,000 100,000 120,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

MEXICO PLANTED HECTARES

• 2,000

4,000 6,000 8,000 2011 2012 2013 2014 2015 2016 3,316 3,141 3,337 4,092 5,579 6,604

MEXICO INSHELL PECAN EXPORTS TO CHINA (MT)

**The export number does not include the quantity that was shipped through US port.

Estimated 2016 crop production was 142,140 MT in Mexico. Approximately 11,000 MT was export to China. (In 2016: 6,604 MT was shipped from Mexico ports. ) Approximately 65% of the inshell pecan exported to China is from Sonora. Sonora main cultivars: Wichita 70% and Western 20%; approximately 60% of crop is 45-55 count per pound. Sonora harvest in September, right on time for the Chinese New Year.

MEXICO

Sources: Liu Guangqin, Jiangsu Academy of Agriculture Sciences, Chinese Academy of Forestry, Research Institute of Subtropical Forestry, Nature’s Finest Foods. Product 2016 Hectare Production until 2016 ( MT) Growing Area Source

Pine Nuts 松子 450,000 square kilometers 12,000 (kernel) Heilongjiang, Jilin, Liaoning, Inner-Mongolia, Yunnam 黑龍江，吉林，了宁，内蒙古，云 南 CCCFNA, Liaoning Forestry Research Institute Walnuts核桃 200,000 900,000 (in shell) 21 provinces, capital city autonomous regions 全国21个省， 自治区 CCCFNA Hazel Nuts 榛子 160,000 40,000 (in shell) Heilongjiang, Jilin, Liaoning, Xinjiang 黑龍江，吉林， 辽宁， 新 疆 The Fruit and Tree Nut Research Institute of Liaoning Province Macadamia 夏威夷 果 100,000 8,000( in shell) Yunnan, Guangxi, Guangdong,Sichuan， Guizhou 云南，广西， 广东，四川，贵州 Yunnan Macadamia Association, Guangxi Fuxu Macadamia Farms Pecan Nut 碧根果 31,533 110 (in shell) Yunnan, Anhui, Zhejiang, Jiangsu, iangxi, Hunan, Henan云南，安徽 江苏，浙江，江西，河南， 湖南广 西，山东 Liu Guangqin, Researcher and Professor of Jiangsu Academy of Agricultural Sciences Pistachio 开心果 3,000 30 (in shell) Xinjiang 新疆 Kashi Regional Forestry Knowledge Promotion Center of Xinjiang Almond 巴旦木 20,000 50,000 (in shell) Xinjiang, Shanxi 新疆，山西 Horticultural College of Xinjiang Agricultural University Cashew Nut 腰果 700 420( in shell) Hainan, Yunnan 海南， 云南 Horticultural College of Agricultural University of Southern China

• 10,000

20,000 30,000 40,000

PROVINCES WHERE PECAN HAS BEEN PLANTED AS OF 2016 (HECTARES)

31,533 Hectares of pecan has been planted in China from 2011 to 2016. 2016 estimated production was 110 MT. 2021 estimated production 39,213 MT.(**) Main Cultivars: Pawnee, Wichita and Western Schley

CHINA IS PLANTING PECAN TREES - FUTURE ESTIMATED PRODUCTION

• 20,000

40,000 60,000 80,000 100,000 120,000 45,223 60,348 76,000 107,134 94,429 65,690 58,118 64,256

U.S. ALMOND SHIPMENTS TO CHINA (MT)

• 10,000

20,000 30,000 40,000 50,000 60,000 70,000 80,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 12,608 19,194 46,037 41,409 79,992 57,702 46,734 36,438 36,550

U.S. INSHELL WALNUT SHIPMENTS TO CHINA (MT)

• 10,000

20,000 30,000 40,000 50,000 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 44,522 30,402 38,657 25,404 31,305

U.S. INSHELL PECAN SHIPMENTS TO CHINA (MT)

Sources: California Walnut, ShoEi Foods, Almond board of California, NPSA, Wonderful Pistachios and Almonds

US PECAN, ALMOND, WALNUT, PISTACHIO SHIPMENTS TO CHINA (MT)

**IN 2016 CHINA PRODUCTION WAS 900,000 MT OF WALNUT & US PRODUCTION WAS 618,000 MT

• 10,000

20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2010 2011 2012 2013 2014 2015 2016 36,287 54,431 55,338 52,163 29,937 19,958 81,647

U.S. PISTACHIO SHIPMENTS TO CHINA (MT)

NOTE: When the price of in-shell pecans becomes too high at the retail level, nut processors and retailers quickly switch their business to lower cost, higher margin nuts.

HOW TO KEEP EXPORT & PRICES STRONG

Harvest date is important for China Market

South Africa

• Harvest in June - July
• Ocean transportation to China is 35 days plus 10 to 20 days inland
• transportation. Timing is very good for Chinese New Year production.

Sonora, Mexico

• Harvest in September - October
• Ocean transportation to China is 30 days plus 10 to 20 days inland
• transportation. Right on time for Chinese New Year production.

Georgia, USA

• Harvest October - December
• Ocean transportation to China is 40 days plus 10 to 20 days inland
• transportation. Majority of the crop does not make it for Chinese New Year

production.

INSHELL PECAN VARIETIES

GEORGIA USA

• DESIRABLE
• CAPE FEAR
• PAWNEE
• KIOWA
• STUART
• BLENDS
• OTHERS

SONORA MEXICO

• WICHITA (70%)
• WESTERN (20%)
• OTHERS (10%)

SOUTH AFRICA

• WICHITA (37%)
• CHOCTAW (17%)
• BLENDS (21%)
• UKALINGA ( 8%)
• WESTERN ( 5%)
• PAWNEE (4%)
• OTHERS (8%)

Source: GWK, Dr. Urias, Campo, Carter Pecan

THESE AREAS PRODUCE PECANS 45-55 NUT PER POUND

GROWER CLEANING PLANTS IN SONORA, MEXICO

Sonora, Mexico inshell pecans going to China are processed in a cleaning plant that dries, cleans, sizes & packages in 25 kg bags.

PACKAGING OF INSHELL PECAN TO CHINA

Most U.S. Inshell Pecans are shipped in different size of Super Sacks. All Inshell Pecans from Sonora, Mexico and South Africa are shipped in 25 kg bags

Source: GWK, Dr. Urias, Campo, Carter Pecan

Preferred Packaging for China Exports

• 50 lb. sacks (shrink wrapped and palletized) are always the 1st choice
• f packaging for China Exports.
• Closed Top Super Sacks in the following sizes are the 2nd choice:

42”x42”x50” Tall (double stacked) or 38”x36”x84” Tall (20 SS per container). Preferably vented w/Baffles

• What doesn’t work?

Open Top Super Sacks in odd sizes which do not fit export containers! = Spilled Nuts, Product Degradation, Lower Tonnage per Container, Negative Image.

• Industry Packaging Consistency is a must.

This will increase efficiency for both growers, handlers, and exporters, (i.e. lower cost and maximize tonnage per load) as well as create a positive image for a premium nut. Pecans are expensive!

CHINA IS MORE AND MORE DEMANDING ON THE QUALITY…as more tonnage becomes available world wide

 Size of the Nuts  Uniformity  Maximum Full Kernel for Variety  Same Shape Nuts in the lot; less willing to accept

Blends with Long nuts mixed with Round nuts.

 Less than 2% defectives (based on nut count) of

Inedible Kernel, less than Full Kernel, Cracks, Sprouts, etc.

GROWERS/ HANDLER

EXPORTER

IMPORTER NUT PROCESSOR WHOLESALE MARKET RETAIR CHAIN STORES E-COMMERCE CONSUMERS

U.S. MODEL

GROWERS

HANDLER/ EXPORTER

IMPORTER NUT PROCESSOR WHOLESALE MARKET RETAIR CHAIN STORES E-COMMERCE CONSUMERS

COMPETITORS MODEL

Quality control Uniformity

Conclusion - Suggestions to Growers

Expect rapidly increasing competition from lower cost producers: South Africa, Mexico and South America. Although pecan export numbers going to China look good: overall exports have not increased significantly and are basically flat over the last 5 year period. Growers in these countries have the margin to lower their prices to move all of their crop into China when needed and still remain profitable. There will be a lot of additional tonnage of quality pecans available in the near future.

• High quality large nuts that have been sized for uniformity will always demand a good price in the market
• Improved packaging , preferably 50 pound sacks or at the least Closed Top Super Sacks, for export.
• Quality sales in China (less than 2% defectives based on nut count of inedible kernel, less than full kernel,

cracks, sprouts, etc.)

• Contract 40% to 50% of your estimated export volume in July-August. Why? Remember 2017 price drop

during the peak harvest period. There was too much tonnage available in the market for sale at one time. Simply stated, the China market cannot absorb this amount of product in a short period of time. The volatility in the market will get worse as more tonnage becomes available.

• Contracting will help to increase the export volume and keep prices high.
• Allow Chinese processors to pre-sale and market inshell pecan to their customers.
• Give China an option to consider U.S. pecans when South Africa and Mexico are offering their crop.

(South Africa normally starts offering some in March, about 2-3 months before harvest. Sonora, Mexico normally starts contracting in July-August, 2 months before harvest).

Thank You!

SALLY ARN

334 . 268 . 8998

SALLY@CARTERPECAN.COM WWW.CARTERPECAN.COM 428 Thomas Drive Panama City Beach, FL 32408

(Questions are welcomed)